Chicago Insurance Redlining Example Were insurance companies in Chicago denying insurance in neighborhoods based on race?

The background In some US cities, services such as insurance are denied based on race This is sometimes called “redlining.” For insurance, many states have a “FAIR” plan available, for (and limited to) those who cannot obtain insurance in the regular market. So an area with high numbers of FAIR plan policies is an area where it is hard to get insurance in the regular market.

The data (for 47 zip codes near Chicago) involact = # of new FAIR plan policies and renewals per 100 housing units race = % minority theft = theft per 1000 population fire = fires per 100 housing units income = median family income in $1000s

First, some description Descriptive statistics for the variables Box plots Histograms Matrix plots etc.

Descriptive Statistics: race, fire, theft, age, involact, income Variable N N* Mean SE Mean StDev Minimum Q1 Median Q3 race fire theft age involact income Variable Maximum race fire theft age involact income

Simple linear regression model Fit a model with involact as the response and race as the predictor A strong positive relationship gives some evidence for redlining

What’s next The matrix plot showed that race is correlated with other predictors, e.g., income, fire, etc. So it’s possible that these are the important factors in influencing involact Next the full model is fit

The regression equation is involact = race fire theft age income Predictor Coef SE Coef T P Constant race fire theft age income

S = R-Sq = 75.1% R-Sq(adj) = 72.0% Analysis of Variance Source DF SS MS F P Regression Residual Error Total

What have we learned? Race is still highly significant (t = 3.94, p-value ≈ 0) in the full model Income is not significant (this isn’t surprising, since race and income are highly correlated).

Diagnostics Some plots are next. Uninteresting (good!) We’ll ignore more substantial diagnostics such as looking at leverage and influence, although these should be done.

Model selection Response is involact i t n r f h c a i e a o Mallows c r f g m Vars R-Sq R-Sq(adj) Cp S e e t e e X X X X X X X X X X X X X X X